Buy Side Equity Trader

By
Fintros
—
October 2017

In the spirit of strict anonymity, names and all identifying information have been removed from the below article. To learn more about Fintros - the leading anonymous opportunity platform for finance leaders - please visit Fintros.com.

I’m a buy-side trader, which is quite different from the role of a sell-side
trader - though I’m quite fortunate to have worked on both sides in my career. Currently,
being on the buy-side, I primarily deliver and execute trades for our fund’s portfolio
managers.

8:30: On a typical day, I’ll come in around
8:30 in the morning and immediately examine all of my overnight orders that executed
in Asia and Europe. I’ll run the executed trades against my trading benchmark model
to analyze the trades and calculate how well each trade was executed.

A
trading benchmark is when, for example, a PM sends me an order to buy Vodafone at
$8.72. I’ll then use that price to evaluate my performance on the Vodafone trade.
In very simple terms my objective is to deliver a price that is as close, or even
better, than the price that the PM originally sent me.

To execute
trades, close to, or even lower than expectation, I’ll carefully consider every
permutation to strategize the best ways to execute the order. For instance, I’ll
look at the size of the order, market characteristics and possibly call some brokers
on The Street to get some colour in terms of who has a block-size buyer/seller that
I can cross the stock against. Essentially, I’m going to try and do as much research
and diligence as possible before I place the order. Then, upon completion of my
due diligence, I’ll actually place the order.

9:00: Once
I’ve finished running my analysis on the previous day’s orders, I’ll quickly jump
on a call with a PM to share the results. On the same call, I’ll share any news
and/or insights that I may have gained from the analysis of my performance.

9:30:
Following that we will break into a team meeting where we will try and
get a good idea of what’s going on at the desk and who’s working on what, as there
are often a bunch of side projects taking place. This is a unique benefit of working
on the buy-side: getting to work on interesting side projects. These projects can
be a big theme that’s going on in the firm – perhaps a big position that’s coming
up, or a big block that we might need to do some research on to figure out pricing.
For example, somebody might want to purchase a billion-dollar swap. Naturally, we
would want to get a better idea of market pricing, so we might want to blast out
some request for quotes (RFQs) to get some colour. Fortunately, at our firm there
tends to be quite a few big themes that are going on at any given time.

Apart
from that, I’m also included in many administrative activities that take place at
our firm. An example here might include a broker’s vote – which is when PMs weigh
how they want our firms commission dollars to be allocated across all the firms
that they deal with in the acquisition of research. These firms might include a
bulge-bracket bank like J.P. Morgan, who provides us with research and execution
services. Alternatively, it could be a smaller shop who provides us only with the
former, and not the latter. So, the idea here is how to calculate the allocation
of commission dollars – or dollars in general – to these firms. In addition to the
above, there might be other more administrative stuff going on, namely spreadsheets
and models.

I’m not solely an equity trader, I also trade multiple
asset-classes, which is a distinction that you get working on the buy-side vs. sell-side.
On the sell-side you are more of an asset-class expert focused on equities, futures,
etc. On the buy-side you have more of an ability to be a generalist. Currently,
on the desk I trade equities and futures. In the derivatives space I execute options,
listed or OTC, as well as swaps. The majority of my focus is, however, on the equities
and futures space, but I do execute on other stuff as well, but frankly it is not
as frequent.

The Afternoon (12:30 – 6:00): Throughout
the remainder of the day we will be executing, as well as meeting with brokers who
come in and inform us about technical relationships and give us some market structure
colour as well as relaying to us the lay of the land. This might include something
as simple as Trump, and how his pick for SEC Chair might impact the market structure,
fees and other nuisances that could potentially affect trading. For example, if
the SEC decides to impose a Maker-Taker removal pilot project and do away with the
existing fees – then, how are the economics of trading going to change. All in all,
it is quite exciting, as well as inherently different from what a sell-side trader
would do.

On the sell-side, you will cover multiple clients. Whereas
on the buy side, you are the client, so your request is the only request that you
will be working on. That said, there is an agency model where you are covering multiple
PMs, so you could say that they are multiple clients, but in general you represent
one firm and you trade in the market as one firm. Meanwhile, in a bank you’re trading
on behalf of CPP (Canada Pension Plan), OMERS (Ontario Municipal Employees Retirement
System), OTPP (Ontario Teacher’s Pension Plan), plus other pension funds, hedge
fund managers, asset managers, etc.

Furthermore, on the buy-side you
are digesting market colour so you can feed it back to your PMs, whereas on the
sell-side there are research guys who have the colour that you can feed to your
clients. It’s a totally different field and your day-to-day is completely different.
From a stress level, it’s probably quite a bit more stressful on the sell-side,
given that client demands need to be acted on very, very, quickly.

All
in all, I love my day-to-day and would recommend my career path to anyone who loves
equities, capital markets and trading.